For our parents and grandparents, retiring early from their jobs usually only happened by force and not by choice, either because of disability or an early buyout. These types of early retirements are never ideal because it doesn’t mean you’re prepared financially; it just means you no longer have a job to go to.
For our parents’ and grandparents’ generations, just having enough from social security and maybe a retirement account to eke by in retirement was as good as it gets. Is this good enough for you?
Wouldn’t you like to be prepared financially for early retirement no matter the situation?
I want you to think about this question:
If you retire early, how will you be able to pay your bills?
In answering that question, I want you to put your savings out of your mind. A savings account is nothing more than a rainy day fund that is constantly being eroded by inflation.
To retire early, you will need a source of income, not a backup plan like a savings account. True early retirement means retiring on your terms or having the means to sustain your lifestyle even if you stop working against your will. Unless you have passive streams of income that exceed your expenses that don’t depend on your physical ability to work, you will not be able to retire early. In other words, if you don’t have income that can be generated in your sleep, you can not achieve financial independence.
If your dream or goal is to retire early, what is your strategy for achieving this goal?
What are you doing now to achieve your goal of retiring early?
If your goal is to retire early, don’t bank on these 7 things…
1 – Your Education.
Don’t bank solely on your degree for early retirement. There are plenty of MDs, MBAs, PhDs, and JDs out there who work their fingers to the bones not only until retirement but beyond retirement. That’s for the lucky ones. Many graduates with professional degrees – even from prestigious universities –
Don’t bank solely on your degree for early retirement. There are plenty of MDs, MBAs, PhDs, and JDs out there who work their fingers to the bones not only until retirement but beyond retirement. That’s for the lucky ones. Many graduates with professional degrees – even from prestigious universities – are struggling to land jobs while contemporaries in trades with technical certificates are in high demand.
On the road to wealth these days, it’s not where you start but where you end up that matters. Many high-wage earners are more concerned about living the highlife than retiring early. They spend money on diminishing assets and incur tons of debt to keep up with the Joneses. Meanwhile, savvy individuals with no degrees live modestly to save money to acquire assets that give back and make money in their sleep – like investments in cash-flowing tangible assets.
2 – Your Corporate 401(K).
Nobody retires early because of their 401(k). That’s because 401(k)s are overrated – with returns swallowed up by fund management fees. Don’t bank on your 401(k) for retiring early. Because your 401(k) is tied to the stock market, the timing could mean everything.
3 – Savings.
The old belief is that working hard and saving your way to retirement won’t do in today’s environment where the rate on savings accounts, CDs, money market accounts, and treasuries fail to keep pace with inflation. What happens to these accounts if inflation continues its current upward trend? Those fixed-income accounts will deteriorate by the day.
4 – Inheritance.
Don’t bank on a fat inheritance for early retirement. This isn’t a Disney movie where someone’s going to swoop in and save you. What’s more, children of doctors, lawyers, and business execs often think they have it made banking on mom and dad taking care of them in their wills.
They think they’ll inherit the big house, and the cars and all will be right, but what many of these kids don’t realize is that the lives they were living were all built on debt. Then the cold reality hits when they realize they’re left with nothing and that the only parties getting anything from an estate are the creditors.
Some estates are eaten up by debt, but then there’s the flipside. Even with large estates with significant assets, some kids are shocked to find that instead of leaving everything to them, their parents decided a charity or another party deserved it more.
5 – Living Large.
Fake it until you make it won’t work with early retirement. Living large and incurring vast amounts of debt and thinking that things will work out on their own is foolish thinking. The foolish spend now and scrimp later, while the wise scrimp now and spend later. The ultra-wealthy – the financially independent – scrimp and save to invest now so they can buy luxuries and take dream vacations later when their passive income streams can independently sustain their lifestyles.
6 – Winning the Lottery, Online Betting, or Speculative Stocks.
Don’t bank on games of chance or speculative stocks for early retirement. The odds are stacked deep against you, so it’s better to focus your energies and efforts on things that have a higher probability of returns.
7 – Financial Advisors and Planners.
Don’t bank on entrusting your money to financial advisors and planners to retire early. Over 90% of professionals fail to beat the market, so why trust your money with them. They’re the only people who will be able to retire early from your investment accounts from all the fees and commissions they charge.
If you want to retire early, you need to plan and change your strategy because what many people have been or are banking on for early retirements will not work.
The ultra-wealthy have taught us – the ones that have retired early – that to cut the cord from your job, you need to create and maintain passive streams of income that work for you 24-7.
And for creating passive streams of income, not just any assets will do. The ultra-wealthy prefer private tangible assets like real estate and private equity that are shielded from broader market volatility and can keep pace with inflation.
A preference for these types of private tangible assets demonstrates the desire by savvy investors to generate passive streams of income and bulletproof these streams as well.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.